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Money managers cut bullish gold positioning but increase in silver

Kitco News

(Kitco News) - Large speculators reduced their net-bullish positioning in gold futures for the third week in a row, this time by 17%, based on data compiled for the most recent reporting week of the Commodity Futures Trading Commission (CFTC).

However, one bank said, the lower level means the gold market is also now less vulnerable to a major shakeout to the downside, as would happen if bullish speculators all headed to the exit at the same time. Meanwhile, money managers increased their bullish posture in silver.

During the week-long period to Feb. 4 covered by the last CFTC report, Comex April gold fell by $20.30 to $1,555.50 an ounce, while March silver gained 10.3 cents to $17.561.

Net long or short positioning in the CFTC data reflect the difference between the total number of bullish (long) and bearish (short) contracts. Traders monitor the data to gauge the general mood of speculators, although excessively high or low numbers are viewed by many as signs of overbought or oversold markets that may be ripe for price corrections.

The “disaggregated” report shows that in the week to Feb. 4, money managers’ net-long position fell to 181,610 futures contracts from 219,938 the week before. The bulk of the decline was due to long liquidation, as the number of gross bullish positions fell by 30,497. There also was some fresh selling, as reflected by a 7,831-lot increase in gross shorts.

“While ETF [exchange-traded-fun] investors continue to buy gold – on 13 days of trading in a row recently – speculative financial investors have withdrawn from gold,” said a research note from Commerzbank. “According to the CFTC’s statistics, they slashed their net long positions by 17%...in the week to 4 February, putting them at their lowest level in nearly three months.”

TD Securities commented that the decline in bullish gold positioning occurred during a time period when global markets at least temporarily shook off coronavirus fears.

“Indeed, as China came back to the market, and risk assets surged amid signs that the virus was being well contained in China, it is likely that the haven buyers exited their positions,” TDS said. “As haven buyers exit, per-trader positioning has largely remained at comfortable levels, suggesting the risk of a major shakeout remains low, and that the need to protect capital from negative real rates should keep appetite for precious metals on the rise as we move through 2020.”

In silver, money managers’ net-long position rose to 55,218 futures contracts from 47,967 in the prior week. This occurred as the amount of short covering (gross longs fell by 11,438 lots) outpaced the long liquidation (total longs fell by 4,187).

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